Threshold Group and Trucost have come together to carry out extensive carbon audits for family foundation investment portfolios.

Seattle, WA-based Threshold Group, a wealth management firm and RIA, and UK-based Trucost have joined forces to provide carbon audits of investment portfolios – particularly those of family foundations. The two firms are also working together to assess the carbon risk exposures of underlying assets in derivative investments.

“Being able to assess the portfolio’s carbon footprint has grown increasingly important to many of our clients concerned about the environmental impact of their holdings,” said Ron Albahary, chief investment officer of Threshold Group. “But that begs the question, ‘what next?’ Our goal is to construct outcome-oriented portfolios, which means also providing clients [with] investment strategies that reduce the carbon risk exposure, and an evolution for getting there.”

Trucost started assessing the carbon risk exposures of large institutional investment portfolios in 2002 and has since expanded its analysis to address asset classes and environmental factors, including water-related issues and stranded assets.

Threshold Group's new affiliation with the firm is the latest in a series of initiatives around impact and mission-related investing, as well as regional investing. In June, for example, it partnered with Canopy in an effort to identify compelling opportunities focused on the Pacific Northwest.

“The investment ecosystem is evolving,” said Brad Harrison, an impact strategist at Threshold Group.

“Shifting away from fossil fuels (coal, petroleum and natural gas) is a short-term divestment priority for some,” Harrison said. “But what may be a more strategic and effective approach is to set long-term reduction targets for portfolio carbon emissions.”

He explained: “For example, if our client’s goal was to lower their portfolio’s carbon footprint, it could be advisable to divest the top holdings within the utilities sector first, as that sector is roughly three times more carbon intensive than the energy sector.”

“Analysis of traditional corporate securities goes a long way in evaluation of a portfolio’s carbon footprint, but by analyzing derivatives, we can go a step further and provide clients a more complete picture,” said Alex Hokanson, director of asset allocation strategies at Threshold Group in Philadelphia, PA.

“Evaluation of derivatives and their impact on the carbon footprint presents unique opportunities due to the complexities inherent in their structure,” added Hokanson.

Threshold Group was founded and is owned by the Russell family, which created Russell Investments.

The firm said a third of its assets under management (approximately $1 billion) is with clients looking to align their portfolios with their missions.

Click here for an article on industry leaders talking about how to align clients' financial and impact goals, as well as whether SRI has become mainstream, during the first session of the Family Wealth Report Summit in March.